Clipper Realty, a self-administered and self-managed real estate company focused on the New York metropolitan area, might be holding a powerful, yet overlooked asset within its portfolio. While analysts focus on the record revenue, strong leasing performance, and the intriguing Article 11 agreement at Flatbush Gardens, there's a silent giant quietly influencing the company's future: *the strategic use of affordable housing units*.

Clipper Realty's development strategy, exemplified by Pacific House and the upcoming 923 Dean Street project, consistently incorporates a 30% affordable housing component. This isn't just a nod to social responsibility. It's a shrewd maneuver that grants the company a significant financial advantage: *tax abatement for 35 years*.

Tax abatement translates directly into increased profitability. While Clipper battles the potential loss of its 250 Livingston Street tenant and navigates the high-interest rate environment, this built-in tax shield provides a robust buffer against market volatility.

Consider the numbers. Pacific House, already fully leased, is projected to achieve a 7% cap rate in 2024, largely thanks to its tax-free status. The 923 Dean Street project, boasting a similar affordable housing mix, is poised to replicate this success. The tax savings generated by these projects alone will likely amount to millions of dollars over the abatement period.

This quiet financial weapon isn't confined to new developments. The Article 11 agreement for Flatbush Gardens, which eliminates real estate taxes entirely, further underscores Clipper Realty's strategic reliance on affordable housing to bolster profitability.

While the company openly discusses its commitment to property improvements, tenant assistance, and higher wages at Flatbush Gardens, the elimination of real estate taxes under the Article 11 agreement is arguably the most transformative aspect of this deal. It frees up substantial capital that can be re-invested in the property or distributed to shareholders.

Average Rent per Square Foot Trends

The following chart shows the average rent per square foot for Tribeca House and Clover House, demonstrating a significant increase since the end of the COVID period (December 2021).

This strategic focus on affordable housing units, though often relegated to a side note in Clipper Realty's communications, is a silent but powerful engine driving the company's financial performance. The significant tax savings, combined with the current strong demand for rental properties in New York, positions Clipper Realty for robust growth, even amidst market challenges.

"Clipper Realty's consistent incorporation of affordable housing units in its development strategy, coupled with the tax abatement benefits, is a significant, yet often overlooked, driver of the company's profitability and future growth potential."

"Pacific House, with 30% affordable units, is on target for a 7% cap rate in 2024. 923 Dean Street project, with a similar affordable housing mix, is projected to achieve similar financial success. The Article 11 agreement for Flatbush Gardens eliminates real estate taxes entirely, providing substantial financial relief."

"Clipper Realty is named after the legendary clipper ships that dominated trade routes in the 19th century. Just like those swift and efficient vessels, Clipper Realty seeks to navigate the real estate market with agility and maximize returns. Perhaps the affordable housing component is their secret wind in the sails."